After Uttar Pradesh, Jharkhand Manages To Renegotiate Solar Tariffs

Solar power developers who won the mega auction of 1,200 MW of projects in Jharkhand 16 months ago have agreed to reduce tariffs, which will help them sign power purchase agreements.

Jharkhand is the second state after Uttar Pradesh to renegotiate solar tariffs arrived at through an auction. But while UP went back on signed PPAs, Jharkhand has not actually signed any because the state distribution company found it too costly.

Developers had offered a tariff of Rs 4.99 per unit of power to the Jharkhand Renewable Energy Development Agency (JREDA) at a recent meeting.

Among projects offered at 45 different locations in the state, winning bids ranged from Rs 5.08 to Rs 7.95, depending on size and location of the project.

The agency has not yet taken a decision and the matter may even be discussed by Jharkhand cabinet at its next meeting likely later this week.

The biggest winner in March 2016 Jharkhand auction was ReNew Power with 522 MW. Other notable winners included Suzlon Energy with 175 MW, OPG Power Generation with 124 MW, Acme Solar with 75 MW, Adani Green Energy with 50 MW and the now defunct SunEdison with 150 MW.

Most of the developers declined comment, given the delicate stage of the negotiations.

A solitary exception was ACME Solar Holdings, which won 75 MW, and indicated its willingness to discuss a reasonable tariff revision. “PPAs were not signed because it was not beneficial for the state to get power at the arrived tariff,” said Nikhil Dhingra, CEO at ACME Solar Holdings, which won 75 MW. “We remain committed to the state for future bids. It will really help both parties if the gap between the bidding and the PPA tariff adoption is minimised for it to make sense for the state.”

Letters of intent were sent out to the winners in May 2016, but thereafter the state power distribution company Jharkhand Bijli Vitaran Nigam (JBVN) refused to actually sign PPAs with the winning developers. The developers claim they were told the rates were too high as the state bought conventional power at about Rs 4.30 per kwH.

JREDA officials were unwilling to comment on why, despite letters of intent having been issued, PPAs had not been signed more than 16 months after auction was held. Nor would they confirm or deny fresh offers from developers.

But in an interaction with ET in October last year, a Jharkhand official had hinted that the delay was due to both JREDA not having enough funds and its apprehension that the winning tariffs at the auction were too high Ten months later, the matter has still not been resolved.

With LoIs already issued, cancelling the bids is not an easy option either for the state. In the meantime, solar tariffs have fallen even further across the country, thanks to a drop in input costs, with the lowest tariff reached being Rs 2.44 per kwH at an auction held for projects at the Bhadla Solar Park in Rajasthan in May.

Developers say Jharkhand tariffs were higher because of many factors. One winner, who did not want to be named, recently pointed out five of them in a letter to JREDA: low solar irradiation, relatively more expensive land, the security threat posed by Naxalites, insufficient power evacuation infrastructure and lack of any sovereign guarantee from the state government that it would step in if the discom JBVNL were to default.

“Jharkhand has large forest cover and large contiguous land without vegetation is scarcely available. Land prices in other states are Rs 3-5 per acre, whereas In Jharkhand they are double and vary between Rs 8 lakh and Rs 10 lakh per acre.”

ET View: Fresh bidding is sensible
Things seem to be in a state of flux, and it would make sense to opt for fresh bidding. Looking ahead, the auction needs to reflect current state of affairs and future prices in the offing. Also, we need to differentiate supply-side policy from the demand side in renewable power. While upfront supply-side subventions can be phased out, given falling costs of hardware, we do need to encourage and step-up demand for renewables with dedicated line capacity and the like. It would be for the greater good. Read more